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Budget to maintain status quo in stock market

FE REPORT | June 02, 2023 00:00:00

The budget seems to have completely overlooked the proposals given by stakeholders to boost the ailing stock market.

Every year ahead of the budget proposal, some expectations are created regarding incentives for investors and listed companies, said Faruq Ahmad Siddiqi, ex-chairman of the Bangladesh Securities and Exchange Commission.

"I think such expectations are not rational as the national budget is an estimation of [revenue] realisations and expenditures."

Mr Siddiqi, however, appreciated that the government did not cut the existing tax benefits.

The government has in the proposed budget reduced the companies' filing of returns and statements to 12 from existing 29 related to tax deduction at source in order to ease business and investment.

Currently, listed companies other than banks, insurers, financial institutions, mobile operators, and tobacco companies, which have issued more than 10 per cent of their shares, pay 20 per cent corporate tax while their non-listed peers pay 27.50 per cent tax.

The rate is 22.5 per cent for the firms that have floated 10 per cent or less shares. The tax rate goes up to 25 per cent from 22.5 per cent in case a company fails to meet regulatory conditions.

Market stakeholders had proposed widening the tax rate gap at least by 15 per cent between listed and non-listed companies to attract more reputed companies to the capital market.

The finance minister while delivering the budget speech said he recommended retaining the existing corporate tax structure to achieve tax-GDP growth targets.

For the last three financial years, the corporate tax rate has been reduced every year, he added.

Market stakeholders had also proposed creating scope of investments of undisclosed money in the capital market, with a 5 per cent tax imposed, to boost the liquidity flow.

Meanwhile, the stock market has been going through a turbulent situation since the beginning of the Russia-Ukraine war last year.

Macroeconomic adversities induced a bearish sentiment in the market, which forced the securities regulator to reinstate the price movement restriction in July 2022 to avert free fall of the market indices.

The liquidity crunch in the money market and the price restriction have brought down market participation while some investors prefer alternate investment options due to the prolonged gloomy outlook of the market.

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